Throughout the annals of history, gold has consistently held a position of immense value. Some of the earliest records depict gold as highly coveted, both for its artistic beauty and as a form of currency. Gold coins, minted as early as 550 BC, laid the cornerstone for our monetary system. Nevertheless, archaeological finds have unearthed treasures containing gold dating back to 4000 BC, highlighting the enduring connection between this precious metal and notions of power and wealth. Even as nations transitioned from gold coins to the convenience of paper money, the ‘gold standard’ ensured that this paper currency retained a significant link to gold.
What renders gold truly precious is its remarkable rarity, a characteristic that continues to captivate people today. To put it into perspective, the world produces more steel in an hour than the total amount of gold poured since the dawn of recorded history!
Gold boasts a multitude of applications. Presently, over half of the gold mined is crafted into exquisite jewelry, while approximately 25% is fashioned into coins and bars. Additionally, gold plays a pivotal role in various industries. Technological advancements fuel the demand for gold; alongside other precious metals, it finds utility in everything from smartphones to electric cars.
However, in an era dominated by digital investments and an array of financial options, what keeps gold firmly entrenched in the portfolios of discerning investors?
It requires a comprehensive evaluation of where, or if, gold aligns with your overall investment strategy and whether it aligns with your objectives for diversifying your assets.
Keep reading as we will examine the factors influencing 1 tola gold price in Pakistan.
Last Week’s Gold Market Performance
The 1 tola gold price in Pakistan (24K) started the week at Rs 202000 and ended the week at Rs 188000.
1. Rise in Gold Prices Due to the Gulf War
Gold prices increased on Tuesday as we saw an approximately 2% rise in the last session. Here, investors have made a return to riskier assets and were waiting for further signals related to the U.S. central bank’s policy stance.
The spot gold price decreased by 0.3 percent and reached $1,856.39 /ounce after reaching a one-week high earlier in the session.
The rise in gold prices is mostly due to political conflict in the Gulf region as it prompted demand for safe-haven assets. However, profit-taking and increased investor appetite for risk exerted downward pressure on prices.
Experts also think that these events would increase the 1 tola gold price in Pakistan.
2. Appreciation in the Pakistani Rupee will affect 1 tola gold price in Pakistan
The interim government implemented strict measures against currency smuggling and unlawful forex business. These actions have made the Pakistani rupee the top-performing currency in Asia during the current fiscal year, as reported by The News on Tuesday.
MSCI Asia Emerging and Frontier Markets Index released data prepared by Topline Securities on Monday. It revealed that from July 1 to October 9, 2023, the rupee appreciated by 1.7% against the dollar. Meanwhile, other Asian currencies experienced a value decline as compared to the dollar, with the Malaysian ringgit dropping by 1.4%, the Korean won by 2.5%, the Thai baht by 5%, and the Bangladeshi taka by 1.9%.
When Pakistan’s interim government assumed office in August, the rupee was under significant pressure. However, in September, the rupee not only recovered all its losses but also surged by 6% against the dollar, outperforming global currencies.
Here, it is the situation that will put extra pressure on the 1 tola gold price in Pakistan and will decrease more this week.
3. High inflation is Dangerous for Pakistan’s Economy
Pakistan is facing an issue of high inflation as it rose to 31.4% year-on-year from 27.4% in August 2023. The rise is credited to rising fuel and energy expenses, creating economic challenges for Pakistanis. Pakistan is currently going through a challenging journey towards an economic recovery during the interim government’s tenure. The country barely evaded a sovereign debt default in July by acquiring a $3 billion loan from the IMF. However, the strict loan conditions have made it difficult to curb the rising inflation. In September, inflation rose by 2% and it was the 1.7% increase seen in August 2023.
Gold experts think that a high inflation rate will favor the market as we might see an increase in the 1 tola gold price in Pakistan.
4. Troubling Pakistani Economy will negatively Impact
The Pakistani economy is passing through troubling times as its real GDP contracted by 0.6 % in the year 2023. In addition to that, it is projected that there might be a potential recovery with GDP growth estimated to reach 1.7 % in FY24 and 2.4 % in FY25.
Economic experts believe that the decline in the economy is credited to a combination of local and international challenges, such as the 2022 floods, government import and capital flow restrictions, domestic political instability, global commodity price super cycle, and severe global financing conditions, as stated in the World Bank’s recent report titled “Pakistan Development Update: Restoring Fiscal Sustainability,” released on Tuesday.
The preceding fiscal year concluded with considerable pressure on domestic prices, fiscal and external accounts, and exchange rates, leading to a loss of investor confidence. Challenging economic conditions, coupled with exceptionally high energy and food costs, reduced incomes, and agricultural losses due to the 2022 floods, have significantly heightened poverty, the report noted.
According to the report, the poverty headcount has risen to 39.4% in FY23. This led to 12.5 million more Pakistanis falling below the Lower-Middle Income Country poverty threshold (US$3.65/day 2017 PPP per capita) compared to 34.2% in FY22.
Experts believe that the 1 tola gold price in Pakistan could increase in the next few weeks due to economic and political uncertainty.
If you’re unsure about whether investing in gold is right for your financial situation, it’s wise to consult a fiduciary financial advisor who prioritizes your financial well-being. Such advisors can help you navigate the fluctuations in 1 tola gold price in Pakistan, which has seen a significant increase from 129,000 to over 219,000 Pakistani Rupees per tola since March 2022.